The President of the Central Bank, Roberto Campos Neto, said in a press conference on Thursday (18/04) that, although the monetary authority will only intervene in the foreign exchange market in the event of “malfunctioning” of the markets, emphasizing that a floating exchange rate is ideal for the Brazilian economy, the BC does not seek to control the dollar.
What does “market malfunction” mean?
Market “malfunctions” occur when exchange rate volatility becomes excessive, harming the economy, especially in global financial crises or uncertain events.
What measures can the BC take to intervene in the foreign exchange market?
The BC has several tools that can be used to intervene in the foreign exchange market, such as:
- Direct interventions in the market: The BC may carry out currency swap auctions, exchanging reais for dollars or vice versa on a future date, in addition;
- Selic rate adjustment: The BC may increase the Selic rate, making investments in reais more attractive and potentially increasing the value of the currency.
What is the impact of the BC's intervention in the foreign exchange market?
The BC's intervention in the foreign exchange market can have several impacts, such as:
- Reduction of exchange rate volatility: The action of the BC can reduce exchange rate volatility, benefiting companies and consumers linked to foreign trade;
- Influencing the price of the dollar: The BC's intervention can influence the price of the dollar, which can have an impact on various sectors of the economy, such as industry, commerce and agribusiness;
- Increase in public debt: The BC may need to use its international reserves to intervene in the foreign exchange market, which could lead to an increase in public debt.
The Brazilian Central Bank will only intervene in the foreign exchange market in the event of “malfunctioning” of the markets. The monetary authority believes that floating exchange rates are ideal for economy Brazilian currency and does not aim to control the dollar exchange rate. However, the BC is monitoring the situation closely and is ready to take action if necessary.
Image: Reproduction/Internet
